"8 Million Strong and Voting!" Small business is the heart beat of the United States economy. This blog searches for issues and answers to helping small business survive and thrive in California and the United States.

Monday, January 25, 2016

Some of you have asked why they are paying more on their unemployment Taxes. Let me try to explain. I posed this question to Greg Riggs at EDD and here is his response when I asked him why California with its budget surplus, didn’t just pay the debt off.

California’s Unemployment Trust Fund first became insolvent in January 2009 due to the great recession. California like many other states received a loan to pay our benefits obligations during the recession. The loan balance currently stands at $6.5 billion as of January 13, 2016. This loan is being repaid primarily from the reduce credit reductions that employers obtain when filing their Federal Unemployment taxes. It should be noted that three other states and one territory still have outstanding loans. Some states secured a bond to pay off the loan, but had to raise state taxes to help pay the bond. In the e-mail below it cites that California has a surplus. I believe that is a reference to other state funds or the State’s General Fund. It does not apply to California’s Unemployment Trust Fund which includes revenue from employers who pay State Unemployment Insurance taxes that are collected by the Employment Development Department and are used to pay benefits. In recent years, California’s General Fund has covered the costs to pay the interests on the outstanding federal loan. Below is a more detailed explanation at the credit reduction.

As a result of the ongoing Unemployment Trust Fund insolvency for California, employers have been subject to a reduction in the credit received on Federal Unemployment taxes. The standard Federal Unemployment Tax Act (FUTA) rate is 6.0 percent on the first $7,000 of earnings by an employee. However, this is typically reduced to a rate of only 0.6 percent as a result of a 5.4 percent credit employers receive. When a state has an outstanding Unemployment Trust Fund loan for more than two years, this credit begins to be reduced annually by increments of 0.3 percent until such time as the outstanding loan balance is repaid or the full FUTA credit is wiped out and employers are left to pay the 6.0 percent tax rate. So in essence, employers Federal Unemployment taxes have been going up by an additional 0.3 percent or $21 per employee each year to help pay down the loan. The first year employers began to have their FUTA credit reduced was in tax year 2011. I hope this helps.

GREGORY M. RIGGS

Deputy Director

Policy, Accountability & Compliance Branch

Employment Development Department

800 Capitol Mall, MIC 76

Sacramento, CA 95814

(916) 654- 7014

It is not clear when the loan will be repaid to the Federal government, but it is expected sometime in 2018 or 2019, so these taxes should increase until it is repaid. Keep in mind, that while there is a surplus of about $200 million in the collections of taxes, this is razor thin and based on a good economy.

If the economy should turn sour, we could be back in a deficit. Does this remind you of Governor Brown's comments in his State of the State speech about the state’s budget?

Note the state is picking up the interest cost on the loan from the Federal government and at this time it is not expected that the state will pass this on to employers.

Mark Quinn, the District Director of the SBA in SF, reported on the SBA lending for last year. Nationally lending was up around 20%. In California however, SBA lending was up significantly more and in the Bay Area was up around 40%. The total SBA lending in California was $5.35 billion. According to Mark, the lending for SBA is probably going to level off and may even go down. This actually could be good news as there is more competition for small business loans heating up.

This is going to be the Year of the Initiatives in California. These will be on the November ballot. In a previous email I mentioned the possibility of two minimum wage initiatives but there are about 19 that are being considered. In 2004 there were 16 propositions. Some of the initiatives being considered are:

Legalization of Marijuana

Plastic Bags

New Gun control laws

Bar state agencies from paying more for prescription drugs than the lowest price paid by the Department of Veteran Affairs

$9 billion in state bonds for school construction.

$2 dollar tax on a pack of cigarettes

Continuation of Proposition 30. There are a couple of measures here.

Lowering the drinking age to 18

Not all of these are going to make it but I think I can safely say voters are probably going to be confused as it will be crowded.

I will have more news on our crowd funding bill in the next week or so, but the good news is, it looks like we will have an author and a coauthor for our legislation. We have tried for about three years to get this passed and are very optimistic this is going to be our year.

Some of you may know Kathy Robertson who was with the Sacramento Business Journal. She left and is now a free-lance reporter. She called me yesterday on a story she is doing about how small business feels about the Affordable Care Act 5 years after its inception. What are your comments? As you all probably know The Republicans will be sending a bill to the President to repeal it. He will surely veto this, but do you think it should be repealed?

Sorry I didn’t get this to you sooner but there is still time to participate in the Webinar January 19. Please be aware of availability of getting a tax credit and information on how to obtain the credit.

Yesterday I received a call from Laura Sydell of National Public Radio asking how small businesses were going to deal with SB 358 the Fair Pay Act which will become effective Jan 1. I said I was not sure if most small businesses knew about the bill and had probably not given much thought as to how they were going to address it in their company. What the bill does, is require employers to provide equal pay to employees regardless of their gender, if they are performing substantially similar functions regardless of their job titles. It also says employers will be required to pay employees equally even if they work at different locations. This of course is subject to business factors like different minimum wage laws per location or cost of living but it is not clearly spelled out in the legislation Lastly, it allows employees to be able to discuss their income with fellow employees without being subject to discrimination from their employer. The employer does have some protection if they can prove the income differences are based on seniority or merit., education, and training. The reason cited for the bill is that women in California make 84% of what men make. Nationally the number is 74%. This law appears to be the strongest state law for gender equality in the United States. It should be noted that the California Chamber of Commerce supported the bill saying it would reduce lawsuits by clarifying how employers can protect themselves. This however is disputed by some others in the legal community. I don’t think any reasonable person would argue the point that there should be gender equality and employers should be held accountable, but as always the devil is in the details, Are you aware of this bill and are you taking steps to change your employment policies if necessary? For full details of this bill go to www.leginfo.ca.gov

Small Business California would like to wish all of you a successful, safe and healthy New Year . I hope for 2016 one of your resolutions will be to speak out and let the small business voice be heard among state and local legislators and the Governor.

Next week Small Business California will be meeting with executives of State Fund. I would appreciate any comments any of you have about State Fund and suggestions how they can better work with California small businesses. Please respond by Monday of next week.

I hope you are all aware that the minimum wage in California will be going up to $10 Jan 1 2016.

Earlier in the week a member asked whether they were required to pay a premium for employees working on Holidays citing Jan 1 as an example. The answer is no . Keep in mind the same rules apply if a nonexempt employee works over 8 hours. In this case overtime must be paid.

The Senate and The House have passed and the President has signed PATH. While there are a lot of important provisions for small business in this bill, the two most important are making the 179 permanent and the R&D credit permanent. Todd McCracken, President of the National Small Business Association said last week “There is no single item in the tax code more critical to incentivizing small business investment than Section 179 expensing.” He goes on to say “the most commonly used small business tax deduction or credit is Section 179 Expensing and one in ten small firms utilize the R&D.”

For those of you not aware of Section 179 it allows up to $500,000 for write offs on investments in new and used equipment and off the shelf software. Had not been signed, the $500,000 limit would have been reduced to $25,000.

For those of you that provide health insurance to your employees, I would guess you don’t provide it to your employees dependents. If you make it available to your employees but do not pay for it you may be creating a problem for the employees dependents because they will not be able to take advantage of any subsidies in the Exchange. This is called the family glitch and is part of the ACA. There are efforts in Washington to change this and Small Business California will be working to change this over the next year.

Enjoy your Holidays and we want to wish all of you a great and healthy New Year.

The budget deal signed by President Obama last week included a delay of 2 years of the Cadillac Tax. Scheduled under the Affordable Care Act, the Cadillac Tax was scheduled to take effect 2018. It now will take effect 2020 and there will be great pressure between now and then to repeal the tax completely.

The Cadillac tax imposes a 40% excise tax on employer sponsored health premiums exceeding $10,250 for individuals and $27,500 for families. The tax is paid by employers.

In 2016 Small Business California will be celebrating its 11th anniversary. Many of you have been receiving these emails/mail chimps from the beginning and we have added literally thousands of small businesses over the last 11 years.

Small Business California has been a factor in Sacramento representing small business with Lori Kammerer, our public affairs representative and I testifying on hundreds of bills coming before the legislature over the years. If you are not currently a member I hope you will consider joining. The cost is $150 a year for small businesses with less than $1 million in gross receipts and $300 for businesses over $1 million. You can join online at www.smallbusinesscalifornia.org or we can invoice you if you provide us information by return email.

Small Business California wants to wish all of you and your family a wonderful Holiday Season.

As I think all of you know I am the co-founder of a Volunteers in Medicine free clinic called Clinic by the Bay in San Francisco. We provide free health services to the working uninsured and take no government money. In November we celebrated our 5th anniversary.

Many people are making contributions to charities over the holidays. I am writing to ask you to consider making a contribution to Clinic by the Bay. You can do so online by going to www.clinicbythebay.org or writing a check and mailing to 4877 Mission St. San Francisco, CA 94112. I will match your contribution so be sure and let me know amount.

Thank you for your consideration.

If you are in the SF area and would like to tour the clinic please let me know and I will schedule it. I love to show it off.

See below for the National results of Small Business Saturday and Small Business video.

Small Business Saturday re-cap

Thank you to all who participated in Small Business Saturday this past weekend! It was a large success, resulting in spending that reached $16.2 billion in 2015, a 14% increase from 2014, and received national attention.

San Francisco was the focal point for a video by American Express on Small Business Saturday. Watch the video:

For those who are interested in the California workers Compensation System, I have attached several articles on recent arrests of physicians who plied their trade in Southern California.

Those who are familiar with the California workers compensation system are aware that much of the fraud, and a very high percentage of the liens produced in California are geographically focused in Southern California.

Because of the propensity for a certain group of physicians in Southern California to treat on a lien basis outside of the networks the California WCIRB (Workers Compensation Insurance Rating Bureau) has identified a significant cost differential between Northern CA and Southern CA.

Many of these providers argue that providing care outside of the networks is offering care to injured workers who would otherwise have no access to medical care in he workers compensation system.

The differences in costs between Northern California and Southern California are now showing up in the insurance underwriting process.

The articles listed below are excellent examples of why the Southern Ca workers compensation system is so expensive.

Those with limited experience in California (or who were not working in the system prior to the passage of SB-899) may not recall back then when there was one back fusion surgery for every laminectomy provided in Workers compensation system in California.

During the same time frame, the group health providers had only three percent of their laminectomy’s resulting in fusions…these articles help provide insight into why there was a difference in the number of surgeries as well as the results of those surgeries…

Prior to SB-899 it was almost impossible for the payers to say no to the physicians requests for multiple surgeries. Back then massive abuses of six and seven unnecessary back surgeries on one injured worker were not uncommon.

To compound the problems for the injured workers, when the multiple back surgeries were not successful, the employees was then given opioids for the intractable pain from the failed surgeries. This resulted in a large number of injured workers who are now opioid addicts.

Opioid addicted injured workers account for a high percentage of the complex and advanced IMRs (Independent Medical Reviews done by Maximus).

The pending regulations from the Division of Workers Compensation for a pharmacy formulary (using evidence based medicine) will help reduce the number of inappropriate requests and questionable denials associated with opioid use and abuse.

Prior to the passage of SB 899 and SB-863 the abuses foisted on the innocent injured workers was appalling and very difficult to stop.

The advent of SB-863 with a focus on Evidence Based Medicine and medical decisions made by medical professionals significantly helped significantly reduce the abuses.

The IMR (Independent Medical Review using evidence based medicine) process outlined in SB-863 takes medical decisions away from non-medical professionals. It protects the injured workers from abuses like those outlined by the FBI in the article printed below.

With the arrest of those physicians listed below we can better understand why the doctors were doing the surgeries.. It would be interesting to see how many of the millions of the liens filed in the system are associated with the doctors indicted in the article below.

A lot of activity for Small Business Saturday. Please see information from Small Business Saturday Show Your Love campaign. I hope you all have a wonderful Thanksgiving and Saturday remember to shop at your locally owned small business.Scott Hauge PresidentSmall Business California 2311 Taraval Street San Francisco, CA 94116shauge@cal-insure.com 415-680-2188

Hello,

It is hard to believe that Small Business Saturday, 11/28/15, is almost here.

Social media has increasingly become a key element to the overall program to drive business to the small businesses that make your community unique. We invite you to “Show Your Love” for Small Business Saturday through your social media channels.

Twitter: · Can’t wait to @ShopSmall this holiday season and celebrate #SmallBizSat at my favorite (insert local store or community)! · Get out there and support small businesses on #SmallBizSat and every day! @ShopSmall

Facebook: (highly recommend a short video plus “Show Your Love" Blue Heart asset) · Who’s excited to #ShopSmall this holiday season? What are your plans for #SmallBizSat? “Like” this post if you plan on visiting your favorite local businesses today! · Why do you love to #ShopSmall? I’m thankful for small businesses for supporting local communities #ShopSmall #SmallBizSat

Hashtags: · #ShopSmall · #DineSmall · #SmallBizSat

Handles: · @ShopSmall

Please let us know if you have any questions, and thanks again for your support!

GO-Biz to Host Series of Workshops for California Businesses Interested in Applying for $75 Million in Tax Credits

Sacramento, Calif. – The Governor’s Office of Business and Economic Development (GO-Biz) today announced a series of 15 workshops across California designed to help businesses apply for the California Competes Tax Credit (CCTC).

“The California Competes tax credit has encouraged hundreds of companies to expand in California and add valuable jobs in the state,” said GO-Biz chief deputy director Will Koch. “The on-line application is simple to navigate and the GO-Biz staff works directly with applicants to make the process as easy as possible.”

This program is open to any business planning to create new full-time jobs in the state, regardless of size or location. Since 2014, GO-Biz has awarded $223 Million to 330 companies projected to create over 42,000 jobs and make $9.6 billion in investments.

GO-Biz will award a total of $200 million in tax credits in fiscal year 2015-16. The next CCTC application period starts January 4, 2016, with $75 million in tax credits available. Businesses interested in applying can register to attend any of the workshops and receive valuable information from GO-Biz staff.

Members of the CCTC team are available to provide technical application assistance. An application guide, Frequently Asked Questions (FAQs), program regulations, and a video explaining how to create an account are available here.

The deadline to submit applications is January 25, 2016, at 11:59 p.m. (Pacific Time) and the online application website will automatically close once this deadline has passed. The online application can be accessed starting January 4, 2016 at www.calcompetes.ca.gov. About California Competes The CCTC is part of the Governor’s Economic Development Initiative (GEDI) which Governor Brown signed legislation to enact in 2013 (AB 93 and SB 90). GO-Biz evaluates the most competitive applications based on the factors required by statute, including total jobs created, total investment, average wage, economic impact, strategic importance and more. Companies are exempted from paying state income taxes in the amount awarded.

About GO-BizThe Governor’s Office of Business and Economic Development (GO-Biz)serves as California’s single point of contact for economic development and job creation efforts. GO-Biz offers a range of services to business owners including: attraction, retention and expansion services, site selection, permit streamlining, clearing of regulatory hurdles, small business assistance, international trade development, assistance with state government, and much more. For more information visit:www.business.ca.gov.

If you have any questions regarding the CCTC or application process, please contact our office at (916) 322-4051 or send an email to CalCompetes@gov.ca.gov.

If you would like to receive information about other GO-Biz programs, press releases, newsletters, and events please click here to register.

Do you have workers' compensation coverage for your employees? If so, either you or your insurance broker have sent an Acord application to your insurance company. This application is what the insurance industry uses to write workers' compensation.

Have you ever read the application? There are two questions which I think you as an employer cannot ask your employees. They are:

Do you have any employees over 60 years old?

Do you have any employees with physical disabilities?

Have you ever been asked these questions?

I have contacted the Insurance Commissioner’s office about this and been told that a workers' compensation application can ask these questions but they seem to agree this is a violation of employment law. The question becomes how do you complete the application if you can’t ask?

The fact that the application ask these questions infers that the insurance companies use this when they underwrite workers' compensation coverage.

The application goes on to say that if you sign the application and misrepresent any information you may be guilty of fraud subject to a fine of $5000.

Small Business California is looking at introducing legislation to require the Acord people to eliminate these questions.

As a SB-Cal member, you will be called on to add your focus and insights into how California legislators should address small business issues, develop and support legislation and pro-active policy solutions to challenges faced by you as a small business owner. That is our strength; the force of informed small businesses acting together.

Small Business California engages in lobbying activities on behalf of its members. Approximately 35% of your dues contribution goes to support these lobbying activities, and, we believe, is not deductible as a business expense under Section 162(e) of the Internal Revenue Code.

As I think you all know I own an insurance agency. I don’t usually write email under Small Business California that are insurance coverage related but over the weekend we had a client that had their building totally destroyed by a fire. The business did not own the building.

In reviewing their insurance at the time of renewal the insured chose to keep all their coverages as is. The fire occurred and in a meeting with the client their contents were one third of what they actually had on a replacement basis. Fortunately their business interruption was on an actual loss sustained basis so they should be okay here but the loss on their contents was about $400,000 more than they had covered. The take away here is review your coverage closely at every renewal. It was not applicable here but see if your policy has a coinsurance clause. If it does, make sure your coverage meets the coinsurance percentage because if it does not you will suffer a penalty for the amount you are under insured.

On the liability side, the insured had $1 million coverage. I don’t know what their lease said so I am not clear whether they had a waiver of subrogation from the building owner. I also don’t know what caused the fire but if it is determined that our insured caused the fire, the building owners insurance will most likely come back against my insured. We always asked for a copy of the lease but had not received it.

There was also damage to buildings on both sides of the burned out building. Again if the insured caused the fire the other building owners insurance company will come back on our insured. The take away here is to read your lease and seriously consider getting an umbrella to have proper protection.

I strongly recommend you review all of your insurance coverages at least on an annual basis and think seriously what would happen if your building was totally destroyed. Do you have a plan to get back into business after a loss?

As a SB-Cal member, you will be called on to add your focus and insights into how California legislators should address small business issues, develop and support legislation and pro-active policy solutions to challenges faced by you as a small business owner. That is our strength; the force of informed small businesses acting together.

Small Business California engages in lobbying activities on behalf of its members. Approximately 35% of your dues contribution goes to support these lobbying activities, and, we believe, is not deductible as a business expense under Section 162(e) of the Internal Revenue Code.

Sidel Systems USA from Atascadero has for over 30 years focused at increasing their clients natural gas energy efficiency. Natural gas is considered to be America's clean fossil fuel energy source. Because it is considered clean it is mostly ignored by governments and industry. It is an unseen fuel, unlike oil and coal. Natural gas enters into a building through a small pipe (gas line) and leaves the building in a bigger pipe (a chimney). Not many ever go up onto the roof to determine what might be leaving their chimney.

America's commercial buildings and industry and the electricity producing power plants in 2014 consumed approx. 19 Trillion cu.ft. of natural gas. Of that amount somewhere between 40% and 60% of that combusted natural gas energy was wasted. It was blown up chimneys across the country as Hot exhaust into the atmosphere. Natural gas, our clean energy source can be consumed to near 100% energy efficiency. It's being done in the residential market.

The Alberta Oil Sands in Fort McMurray, Alberta is considered to be North America's largest single source contaminator to the environment. This industry provides to Alberta a lot of high paying jobs and Canada with a lot of income and America with a lot of oil. To get to this oil in the ground, large natural gas Once Through Steam Generators are used to produce a whole lot of steam that is injected into the ground to soften the oil so it will flow to be collected. These boilers vent a lot of combusted natural gas exhaust into the atmosphere. The province of Alberta and GE have teamed up together and put out a challenge to companies around the world to help them find a way to increase the efficiency of these large natural gas appliances. Sidel Systems USA Inc. and our Condensing Flue Gas Heat Recovery units have been doing this precise practice for over 30 years. We applied to the Challenge and were accepted through round 1 and are now winners of round 2.

Not only is this project exciting, but it gives Sidel Systems the opportunity to work with the engineers from GE, and the administration and engineers of the province of Alberta, with the goal of increasing their natural gas energy efficiency not only in Ft McMurray but across the province at their commercial buildings and industries. Being in a northern climate their degree heating days are much more than California.

Natural gas maybe North America's clean fossil fuel but there is still a lot of CO2 in this combusted exhaust. The US Department of Energy states that for every 1 million Btu's of heat energy that is recovered from the combusted exhaust and is utilized, 117 lbs of CO2 will Not be put into the atmosphere. At these large commercial and industrial natural gas consumption locations, this adds up into many tons per day.

California needs to also recognize this opportunity.

Have a Fantastic Day!

What natural gas is not wasted today, will be there to be used another day.

As a SB-Cal member, you will be called on to add your focus and insights into how California legislators should address small business issues, develop and support legislation and pro-active policy solutions to challenges faced by you as a small business owner. That is our strength; the force of informed small businesses acting together.

Small Business California engages in lobbying activities on behalf of its members. Approximately 35% of your dues contribution goes to support these lobbying activities, and, we believe, is not deductible as a business expense under Section 162(e) of the Internal Revenue Code.

About Me

Small Business California is a proactive, non-partisan business advocate whose only agenda is the well being of California’s 3.2 million small businesses. Working for all small businesses for a better business environment, SB-Cal is responsive to the needs of small business owners.
Section 6033(e) Notice and Disclaimer:
Small Business California engages in lobbying activities on behalf of its members. Approximately 35% of your dues contribution goes to support these lobbying activities, and, we believe, is not deductible as a business expense under Section 162(e) of the Internal Revenue Code. Please consult your own accountant or tax attorney.